Dip in copper prices fails to enthuse local traders

Deepa Krishnan, TNNOct 23, 2007, 07.51am IST

MUMBAI: Copper prices, which have been ruling high, have corrected in the international market owing to higher inventories in the warehouses. The domestic traders are of the view that these prices are still inflated due to fund interest in the commodity. They are, however, cautiously booking orders as demand continues to be high.

Bombay Metal Exchange's (BME) Surendra Mardia pointed out that copper was ruling at $8,000 per tonne in the international market when the inventories were at 25,000 tonne but the price is still ruling at $7,800 levels when the stocks are near 1,50,000 tonne. "I expect prices to rule between $7,500-7 ,800 levels till the end of the year. Any revision in this level should come about in the beginning of the new year," Mr Mardia said. Copper is currently at $7,800 levels.

He further said that domestic traders and manufacturers are cautiously booking their contracts at the current levels as domestic demand is high. The production costs are currently less than half of the final price, making it lucrative for more people to get into the production side of copper.

Copper production was much lower in the first half of 2007, at 131,000 tonne as against 208,000 tonne, which pushed copper to a high of $8,300 per tonne in May. The production is estimated to be much higher in the coming year.

A report from Anand Rathi Commodities stated that metal prices will soften as supplies continue to increase. Miners have been struggling to ramp up metal production to take advantage of copper prices that have gained more than 4-fold, said the report.

Internationally, the prices came under pressure from data showing US new home construction started falling in September to a 14-year low, suggesting low demand for base metals.

The warehouse stocks in London Metal Exchange (LME) had gained 7.8% during the week to remain at 148,950 tonne. In October, LME stocks are up almost 13%. The inventories have risen some 40% since the middle of the year. Copper inventories in warehouses monitored by the Shanghai Futures Exchange had also risen by 9% in the week fuelling further profit taking. Analysts expect the bearish trend to continue. According to a report from MAPE Admisi Commodity Research, the markets are likely to correct further from current levels and test Rs 7,710 levels in the short-term.

MCX copper had corrected to test Rs 308 per kg. It could fall further to Rs 304.